The global clash to capture your cash

From the takedown of Silk Road to the endless propaganda pushing the 'inevitable' cashless society, governments and financial institutions are manoeuvring to monitor your money. Whoever wins, you lose.

The very first two speakers at the inaugural DiG Festival that kicked off in Newcastle on Thursday morning represented opposing sides in one of the most important global battles for political surveillance and control that there's ever been — and they probably didn't even realise it.

Commonwealth Bank's Nick Aronson kicked off. As the bank's global head of of "transaction banking solutions", he had plenty of anecdotes about the supposed "inconvenience" of cash, starting off with his own #firstworldproblems burden earlier in the day of having to — look, I don't know how he even survived this trauma — of having to cross the road and withdraw cash from an ATM before he could buy fuel for his car.

Most Australians still use cash for the majority of their financial transactions, Aronson said — at least in terms of the number of transactions. But the cash transactions are generally low value, accounting for less than 15 percent of the total value of all transactions.

And handling all that cash costs the Australian economy between AU$4 billion and AU$4.5 billion a year. Allegedly. No source was given.

Claims like this of a "cost" to the economy is almost always a red herring. The money paid to handle cash doesn't vanish; it pays the wages of cashiers and bank tellers and the drivers of armoured cars, who in turn spend that money. It's just money that's going somewhere other than where the person making the claim wants it to go.

Commonwealth Bank has seen some customers achieve massive cost savings when they've moved from cash payments to contactless card solutions, especially in high-volume environments such as sporting venues.

As it happens, earlier this week, MasterCard was pushing cashless society, too.

"Aussies are emptying their wallets: New study shows we've turned our back on cash," was the headline on the media release launching its report "The Cashless Journey", which "tracks how 33 major economies are progressing from cash-based to cashless societies".

Progressing.

On a journey.

Curious language, that, and it's sprinkled throughout the media release like chocolate drops in an expensive muffin. Or like fishhooks in the bait.

"Australia is a global leader in moving towards cashless payments" and "Australia's advanced position in payments" and Australians are eager to "free themselves from the inconvenience of cash" and "while the study shows Australia is ahead of the pack globally, it is evident there is still work to be done, particularly in capturing low value payments".

My favourite line is this one, from the report's web page: "The global journey from cash to cashless, boosting economic growth and advancing financial inclusion."

It's a given that this journey to a cashless world is one we want to take, and that it'll somehow lead to "financial inclusion". But is it?

A cashless society is certainly good for MasterCard and Commonwealth Bank. They get more transaction fees. It's good for vendors too, apparently, because it's cheaper than handling cash.

But what's in it for me?

"The challenge now is educating Australians that small purchases like heading down the road to grab a coffee and a paper can be made with greater convenience by leaving the cash at home," said MasterCard Australasia division president Eddie Grobler in the release.

But what, exactly, is more convenient about slipping a wallet containing a plastic card into my pants pocket, as opposed to a wallet containing a $10 note?

All of this technology seems less about my convenience, and more about the desires and profitability of financial institutions. They get to insert themselves into the financial transaction stream between me and the coffee shop and everyone else, and charge us for the privilege.

A cashless society is more convenient for governments, too, of course. Once upon a time, administration costs made it too expensive for governments to tax every little transaction. A balance was reached. So presumably when technology allows governments to track and eventually tax ever-smaller transactions, they'll also lower the tax rates to maintain the balance?

As soon as news broke that the FBI had arrested Ross William Ulbricht, allegedly the operator of Silk Road, and seized $3.6 million worth of Bitcoins, Bitcoin prices plummeted.

Silk Road and Bitcoin were a natural fit, because both purported to provide anonymity. Both were therefore handy for people conducting transactions that they wished to hide from governments because they were illegal, or to avoid taxation, political persecution, or simple social embarrassment.

But for the process to work, both components had to preserve anonymity. With Silk Road's anonymity compromised, Bitcoin naturally loses some of its value.

And that brings me to the second speaker at DiG Festival, Dr Tom Chen, marketing lecturer at the University of Newcastle.

Chen spoke about "The rise of co-creative consumers" — that is, communities of people who use new technologies to come together and trade in under-utilised resources. Look at ParkatmyHouse, which lets people rent out their unneeded private garage, driveway, or car park space. Look at SwapaDVD.com, where you can swap DVDs you've watched for those you haven't.

Peer-to-peer economic exchanges such as these don't involve third-party financial services like MasterCard — or even, in cases like SwapaDVD.com, any exchange of cash. The online services simply introduce the two parties. Yet, both parties get something of value.

As the web makes it constantly easier and cheaper for like-minded people to find each other online, more and more of these cashless transactions will take place. But they're a completely different kind of "cashless" from those envisioned by MasterCard or the Commonwealth Bank.

There's a reason why Commonwealth Bank refers to its Kaching products as providing peer-to-peer transactions when those transactions still go through the bank, not directly from peer to peer. The bank, like all the other financial services companies and governments, wants you to think that peer to peer means what it says it means — because it doesn't want you to get into the real kind.